CORPORATIONS-BASIC

CONSIDERATIONS
Republic Act No. 11232
A. Historical Background
1906 – Corporation Law (Act 1459)

BP 68- Corporation Code of the Philippines was passed

on May 1, 1980, the date of its effectivity

RA 11232 – REVISED CORPORATION CODE OF THE

PHILIPPINES- FEB. 23, 2019

Corporation Code is the general law on Private

Corporation regarding to its creation, formation and
powers.
CONCEPT AND ATTRIBUTES OF A CORPORATION

A. Statutory definition of a Corporation

SEC. 2. Corporation Defined. – A corporation is an

artificial being created by operation of law, having
the right of succession and the powers, attributes,
and properties expressly authorized by law or
incidental to its existence.
Attributes of a Corporation

(1) It is an artificial being;

(2) It is created by operation of law;
(3) It has the right of succession; and
(4) It has only the properties expressly
authorized by law or incidental to its
existence.
 B. Attributes of a Corporation
Artificial Being
1. a juridical person capable of having rights and
obligations, w/ a personality separate and distinct from
its members or stockholders
2. hence, stockholders are not personally liable for corp.
obligations and cannot be held liable to third persons who
have claims against the corp. beyond their agreed
contribution to the corporate capital (paidup capital and
unpaid subscriptions) This is known as the doctrine of
limited liability.
B. Attributes of a Corporation

2. Created by operation of law

B. Attributes of a Corporation

3. Has the right of succession

B. Attributes of a Corporation

4. Has the powers, attributes and

properties expressly authorized by law or
incident to its existence
Problem

Three (3) of the following are attributes of a corporation.

Which is the exception? (Phil CPA, 89-1)
a. An artificial being
b. Has the right of succession
c. Has power, attributes and properties expressly
authorized by law or incident to its existence.
d. Created by agreement of the corporation.
Problem

Three (3) of the following are attributes of a corporation.

Which is the exception? (Phil CPA, 89-1)
a. An artificial being
b. Has the right of succession
c. Has power, attributes and properties expressly
authorized by law or incident to its existence.
d. Created by agreement of the corporation.
Advantages of the Corporate
Organizations
1. Separate juridical personality
2. Limited liability to investors
3. Free transferability of units of ownership
4. Centralized Management
ADVANTAGES OF A CORPORATION

 Perpetual/continuous existence.
 Transferability of Shares.
 It attracts more investors
ADVANTAGES OF A CORPORATION

 Perpetual/continuous existence.
 Transferability of Shares.
 It attracts more investors
DISADVANTAGES OF A CORPORATION

 COSTLY TO FORM.
 HIGHLY REGULATED by the SEC and other
government agencies like the BSP, CHED, etc.
 Limited liability may discourage creditors.
Which of the following is the disadvantage of forming a
corporation? (Phil CPA, 93-2; 94-2; 96-1)
a. The free and ready transferability of ownership
b. The shareholders are not liable for the debts of the
business.
c. Because of the power of succession, the existence of
the entity is not affected by the personal vicissitudes of
the individual shareholders.
d. The subservience of minority stockholders to the
wishes of the majority subject only to equitable
restraint.
Which of the following is the disadvantage of forming a
corporation? (Phil CPA, 93-2; 94-2; 96-1)
a. The free and ready transferability of ownership
b. The shareholders are not liable for the debts of the
business.
c. Because of the power of succession, the existence of
the entity is not affected by the personal vicissitudes of
the individual shareholders.
d. The subservience of minority stockholders to the
wishes of the majority subject only to equitable
restraint.
 Consequences/Implications of
Separate Personality

Doctrine of Corporate Entity/ Doctrine of

Separate Personality -
A corporation is a legal or juridical person with a
personality separate and apart from its individual
stockholders or members and from any other legal
entities to which it may be connected.
Similarities between Partnership and
Corporation:

1. Both have juridical personality separate and distinct from that

of the individuals composing it;
2. Both can only act through its agents;
3. Both organizations are composed of an aggregate of individuals
(except corporation sole and OPCs);
4. Both distribute profits to those who contribute capital to the
business;
5. Both can only be organized when there is a law authorizing
their organization; and
6. Both are taxable entities (xpn, professional partnerships).
Classification Of Corporations
Under The Code
SEC. 3. Classes of Corporations. – Corporations formed
or organized under this Code may be stock or nonstock
corporations. Stock corporations are those which
have capital stock divided into shares and are
authorized to distribute to the holders of such
shares, dividends, or allotments of the surplus
profits on the basis of the shares held. All other
corporations are nonstock corporations.
 C. Classification of Private Corporations
1. As to existence of Stocks:
Stock Corporation – Corporations which have capital
stock divided into shares and are authorized to
distribute to the holders of such shares dividends or
allotments of the surplus profits on the basis of the
shares held (more important distinction). (Sec. 3)
Non-stock Corporation – A corporation where no part of
its income is distributable as dividends to its members,
trustees, or officers, subject to the provisions of this
Code on dissolution. (Sec. 87)
C. Classification of Private Corporations

2. As to the number of persons who compose them:

a. Corporation aggregate‐ corporation consisting of
more than one member or corporator;
b. Corporation Sole‐ religious corporation which
consists of one member or corporator only and his
successor.
c. One-person corporation (OPC) – corporation with a
single stockholder.
Question

The Catholic Church of the Philippines may be

regarded as an example of:
a. Stock corporation
b. Corporation sole
c. Corporation by prescription
d. Both of b and c
e. None of the above
Question

The Catholic Church of the Philippines may be

regarded as an example of:
a. Stock corporation
b. Corporation sole
c. Corporation by prescription
d. Both of b and c
e. None of the above
 C. Classification of Private Corporations

3. As to whether they are for religious purpose or

not:
a. Ecclesiastical corporation‐ one organized for
religious purpose
b. Lay corporation‐ one organized for a purpose
other than for religion.
C. Classification of Private Corporations

4. As to whether they are for charitable

purpose or not:
a. Eleemosynary‐ one established for
charitable purposes
b. Civil‐ one established for business or
profit
 C. Classification of Private Corporations

5. As to state or country under or by whose laws they have

been created:
a. Domestic‐ one incorporated under the laws of the
Philippines
b. Foreign‐ one formed, organized, or existing under any
laws other than those of the Philippines and whose laws
allow Filipino citizens and corporations to do business in its
own country or state. (Sec 123)
*License is necessary for;
1. Regulation purposes and
2. Access to local courts.
C. Classification of Private Corporations

6. As to their legal right to corporate existence:

a. De jure‐ one existing both in fact and in law
b. De facto‐ one existing in fact but not in law

7. As to whether they are open to the public or not:

a. Close‐ one which is limited to selected persons or
members of the family. (Sec 95‐ 104)
b. Open‐ one which is open to any person who may
wish to become a stockholder or member thereto
C. Classification of Private Corporations

8. As to their relation to another corporation

a. Parent or Holding‐ one which is related to another
corporation that it has the power either, directly or
indirectly to, elect the majority of the director of
such other corporation
b. Subsidiary‐ one which is so related to another
corporation that the majority of its directors can be
elected either, directly or indirectly, by such other
corporation
 C. Classification of Private Corporations
9. As to whether they are corporations in a true sense or only in a
limited sense:
a. True‐ one which exists by statutory authority
b. Quasi‐ one which exist without formal legislative grant.
i. Corporation by prescription‐ one which has exercised
corporate powers for an indefinite period without interference
on the part of the sovereign power and which by fiction of law,
is given the status of a corporation;
ii. Corporation by estoppel‐ one which in reality is not a
corporation, either de jure or de facto, because it is so
defectively formed, but is considered a corporations in relation
to those only who, by reason of theirs acts or admissions, are
precluded from asserting that it is not a corporation.
C. Classification of Private Corporations

10. As to whether they are for public (government) or private

purpose:
a. Public‐ one formed or organized for the government or a
portion of the State
b. Private - one formed for some private purpose, benefit or
end

11. Going public or not

a. Going public – Decide to list its share in the stock exchange
b. Going private – Restrict the share to certain group
Question
Corporations organized by private persons performing
public function and for profits to private person are: (Phil
CPA, 89-2)
a. Public Corporations
b. Government Controlled Corporations
c. Quasi-Public Corporations
d. Private Corporation
Question

Corporations organized by private persons performing

public function and for profits to private person are: (Phil
CPA, 89-2)
a. Public Corporations
b. Government Controlled Corporations
c. Quasi-Public Corporations
d. Private Corporation
Question
A corporation created in strict or substantial conformity
with the statutory requirements for incorporation and
whose right to exist as a corporation cannot be
successfully attacked even in a direct proceeding for that
purpose by the State is known as: (Phil CPA, 91-2)
a. De jure corporation
b. De facto corporation
c. Corporation by estoppel
d. Answer not given
Question
A corporation created in strict or substantial conformity
with the statutory requirements for incorporation and
whose right to exist as a corporation cannot be
successfully attacked even in a direct proceeding for that
purpose by the State is known as: (Phil CPA, 91-2)
a. De jure corporation
b. De facto corporation
c. Corporation by estoppel
d. Answer not given
Components of a Corporation

SEC. 5. Corporators and Incorporators, Stockholders

and Members. – Corporators are those who compose
a corporation, whether as stockholders or
shareholders in a stock corporation or as members
in a nonstock corporation.
Incorporators are those stockholders or members
mentioned in the articles of incorporation as
originally forming and composing the corporation
and who are signatories thereof.
Components of a Corporation

(1) Corporators
(2) Incorporators
(3) Stockholders
(4) Members
Components of a Corporation

 Corporators – Those who compose a corporation, whether as

stockholders or members

 Incorporators – They are those mentioned in the Articles of

Incorporation as originally forming and composing the corporation
and who are signatories thereof.
Incorporator vs. Corporator
INCORPORATOR
Signatory of the Articles of Incorporation .
Does not cease to be an incorporator upon
sale of his shares
Limited to not more than 15.
Originally forms part of the corporation.
GR: Filipino citizenship is not a requirement.
XPN: When engaged in a business which is
partly or wholly nationalized where majority
must be residents
CORPORATOR
May or not be signatory of the Articles of
Incorporation
Cease to be a corporator by sale of his shares in
case of stock corporation. In case of non‐stock
corporation, when the corporator ceases to e a
member.
Limited to available authorized capital stock.
Not necessarily
Depending on the nature of business of the
corporation. If it is nationalized, the citizenship
becomes material.
MINIMUM CAPITAL REQUIREMENT

SEC. 12. Minimum Capital Stock Not Required of

Stock Corporations. –
Stock corporations shall not be required to have a
minimum capital stock, except as otherwise
specifically provided by special law.
POWERS OF THE BOARD

1. Control over the properties and assets of the

corporation.
2. Conduct of business.
3. All corporate powers.

These are entrusted to the BOD, unless provided

otherwise.
NUMBER AND QUALIFICATIONS OF
DIRECTORS
1. Not be more than fifteen (15) directors or the number
of trustees which may be more than fifteen (15)
2. Owns at least one share
3. Ownership (legal not beneficial ownership i.e. pledger,
mortgagor) must stand in the name of the director in the
books of the corporation.
4. Possess all the qualifications and none of the
disqualifications.
BOARD OF DIRECTORS/TRUSTEES/OFFICERS
SEC. 22. The Board of Directors or Trustees of
a Corporation; Qualification and Term. –

Unless otherwise provided in this Code, the

board of directors or trustees shall exercise
the corporate powers, conduct all business,
and control all properties of the corporation.
BOARD OF DIRECTORS/TRUSTEES/OFFICERS
SEC. 22. The Board of Directors or Trustees of a Corporation;
Qualification and Term. Cont’d.
xxx
Directors shall be elected for a term of one (1) year from
among the holders of stocks registered in the corporation’s
books, while trustees shall be elected for a term not
exceeding three (3) years from among the members of the
corporation. Each director and trustee shall hold office until
the successor is elected and qualified. A director who ceases
to own at least one (1) share of stock or a trustee who ceases
to be a member of the corporation shall cease to be such.
BOARD OF DIRECTORS/TRUSTEES/OFFICERS
SEC. 22. The Board of Directors or Trustees of a Corporation;
Qualification and Term. – cont’d.
The board of the following corporations vested with public
interest shall have independent directors constituting at
least twenty percent (20%) of such board:
a. Corporations covered by Section 17.2 of Republic Act No.
8799, otherwise known as “The Securities Regulation Code,”
namely those whose securities are registered with the
Commission, corporations listed with an exchange or with
assets of at least Fifty million pesos (P50,000,000.00) and
having two hundred (200) or more holders of shares, with at
least one hundred (100) shares of a class of its equity shares;
BOARD OF DIRECTORS/TRUSTEES/OFFICERS
SEC. 22. The Board of Directors or Trustees of a Corporation;
Qualification and Term. – cont’d.
b. Banks and quasi-banks, NSSLAs, pawnshops, corporations
engaged in money service business, pre-need, trust and
insurance companies, and other financial intermediaries; and
c. Other corporations engaged in business vested with public
interest similar to the above, as may be determined by the
Commission, after taking into account relevant factors which
are germane to the objective and purpose of requiring the
election of an independent director, such as the extent of
minority ownership, type of financial products or securities
issued or offered to investors, public interest involved in the
nature of business operations, and other analogous factors.
BOARD OF DIRECTORS/TRUSTEES/OFFICERS
SEC. 22. The Board of Directors or Trustees of a Corporation;
Qualification and Term. – cont’d.
An independent director is a person who, apart from
shareholdings and fees received from the corporation, is
independent of management and free from any business or
other relationship which could, or could reasonably be
perceived to materially interfere with the exercise of
independent judgment in carrying out the responsibilities as a
director.
BOARD OF DIRECTORS/TRUSTEES/OFFICERS
SEC. 22. The Board of Directors or Trustees of a Corporation;
Qualification and Term. – cont’d.
Independent directors must be elected by the shareholders
present or entitled to vote in absentia during the election of
directors. Independent directors shall be subject to rules and
regulations governing their qualifications, disqualifications,
voting requirements, duration of term and term limit,
maximum number of board memberships and other
requirements that the Commission will prescribe to
strengthen their independence and align with international
best practices.
 REPOSITORY OF CORPORATE POWERS
Who shall exercise corporate powers?
GR: The Board of Directors or the Board of Trustees (Sec. 22).
XPNs:
1. In case of delegation to the Executive Committee duly authorized
in the by‐laws;
2. Authorization pursuant to a contracted manager which may be an
individual, a partnership, or another corporation.
Note: In case the contracted manager is another corporation, the
special rule in Sec. 43 applies.
3. In case of close corporations, the stockholders may manage the
business of the corporation instead by a board of directors, if the
articles of incorporation so provide.
Question

Contracts between a corporation and third persons must be

made by or under the authority of its: (Phil CPA, 93-1; 96-1)
a. Board of Directors
b. Stockholders
c. President and Chief Operating Officer
d. General Manager.
Question

Contracts between a corporation and third persons must

be made by or under the authority of its: (Phil CPA, 93-1;
96-1)
a. Board of Directors
b. Stockholders
c. President and Chief Operating Officer
d. General Manager.
 Corporate Officers

 President – Must be a director at the time the assumes

office, not at the time of appointment;
 Treasurer – May or may not be a director; as a matter of
sound corporate practice, must be a resident
 Secretary – Need not be a director unless required by the
by‐laws; must be a resident and citizen of the Philippines;
(Sec. 24); and
 Such other officers as may be provided in the by‐laws.
Corporate Officers
SEC. 24. Corporate Officers. – Immediately after their election, the
directors of a corporation must formally organize and elect:
(a) a president, who must be a director;
(b) a treasurer, who must be a resident;
(c) a secretary, who must be a citizen and resident of the Philippines; and
(d) such other officers as may be provided in the bylaws.
If the corporation is vested with public interest, the board shall also elect
a compliance officer.
Corporate Officers
SEC. 24. Corporate Officers. – CONT’D.
The same person may hold two (2) or more positions
concurrently, except that no one shall act
 as president and secretary or
 as president and treasurer
at the same time, unless otherwise allowed in this Code.
The officers shall manage the corporation and perform such
duties as may be provided in the bylaws and/or as resolved by
the board of directors.
Corporate Officers

 Note: An officer is also considered a corporate officer if he has been

appointed by the board of directors. (Easycall Communications Phils.,
Inc. v. Edward King, G.R. No. 145901, Dec. 15, 2005)
 Any two or more positions may be held
concurrently by the same person, except that no
one shall act as president and secretary or as
president and treasurer at the same time. (Sec.
24)
 Chairman and vice chairman not allowed. (SEC
Opinion)
 BASIC RIGHTS OF STOCKHOLDERS
1. Direct or indirect participation in management;
2. Voting rights (Section 6);
3. Right to remove directors (Sec. 27);
4. Proprietary rights:
1. Right to dividends;
2. Appraisal right (Sec. 80);
3. Right to issuance of tock certificate for fully paid shares (Sec. 63);
4. Proportionate participation in distribution of assets in liquidation (Sec
139);
5. Right to transfer of stocks in corporate books (Sec 62);
6. Pre-emptive right (Sec38)
BASIC RIGHTS OF STOCKHOLDERS

5. Right to inspect book and records (Sec 73);

6. Right to be furnished with the most recent
financial statements/financial reports Sec. 74);
7. Right to recover stocks unlawfully sold for
delinquent payment of subscription.
8. Right to file individual suit, representative suit,
and derivative suits.
Steps in the Formation of a Corporation

1. PROMOTION
2. INCORPORATION
A. DRAFTING OF ARTICLES OF INCORPORATION
B. FILING OF ARTICLES AND PAYMENT OF FEES
C. EXAMINATION OF ARTICLES BY SEC; APPROVAL
OR REJECTION
3. FORMAL ORGANIZATION AND COMMENCEMENT
1. PROMOTION

The “promoter” brings together persons interested

in the business enterprise and sets in motion the
machinery that leads to the formation of the
corporation.

“Promoter” is a person who, acting alone or with

others, takes initiative in founding and organizing
the business or enterprise of the issuer and receives
consideration therefor.
Mandatory Requirements of the Code
1. Execution of constitutive documents (AOI, By-laws);
2. Payment/delivery of contributions – delivered to and held in trust
by a designated trustee;
3. Submission of constitutive documents to SEC for review or
evaluation; and
4. SEC action – issuance of certificate of registration.
Note: Once contributions are made before incorporation, such
subscriptions are irrevocable for a period of 6 months (general rule).
Exceptions:
1. When all of the other subscribers consent to the revocation; or
2. When the incorporation fails to materialize (Sec. 60)
 FORMATION AND ORGANIZATION OF
CORPORATION
Incorporators
SEC. 10. Number and Qualifications of Incorporators. – Any person,
partnership, association or corporation, singly or jointly with others
but not more than fifteen (15) in number, may organize a corporation
for any lawful purpose or purposes:
Provided, That natural persons who are licensed to practice a
profession, and partnerships or associations organized for the purpose
of practicing a profession, shall not be allowed to organize as a
corporation unless otherwise provided under special laws.
Incorporators who are natural persons must be of legal age.
 FORMATION AND ORGANIZATION OF
CORPORATION
Incorporators
SEC. 10. cont’d.
Each incorporator of a stock corporation must own
or be a subscriber to at least one (1) share of the
capital stock.
A corporation with a single stockholder is
considered a One Person Corporation as described
in Title XIII, Chapter III of this Code.
FORMATION AND ORGANIZATION
A. Submission of Articles of Incorporation

Articles of Incorporation – is the charter of

the corporation, and the contractual
relationships between the State and the
corporation, the stockholder and the State,
and between the corporation and its
stockholders.
FORMATION AND ORGANIZATION
B. Contents and Form of the Articles of Incorporation (Secs. 13
and 14)
1. Corporate Name;
2. Purpose Clause;
3. Principal office;
4. Term of existence, if the corporation has not elected
perpetual existence;
5. Incorporators;
6. Directors or trustees;
7. Capitalization;
8. Shares of stock;
9. Such other matters consistent with law and which the
incorporators may deem necessary and convenient.
Problem

Generally, a corporation’s article of incorporation must

include all of the following except the
a) Name of the corporation
b) Number of authorized shares
c) Name of each incorporators
d) Quorum requirements
Problem

Generally, a corporation’s article of incorporation must

include all of the following except the
a) Name of the corporation
b) Number of authorized shares
c) Name of each incorporators
d) Quorum requirements
ADOPTION OF BY‐LAWS
What are by‐laws?

A: Rules and regulations or private laws enacted by the corporation

to regulate, govern and control its own actions, affairs and
concerns and of its stockholders or members and directors and
officers in relation thereto and among themselves in their
relation to it.
ADOPTION OF BY‐LAWS
SEC. 45. Adoption of Bylaws. –
For the adoption of bylaws by the corporation, the
affirmative vote of the stockholders representing at least a
majority of the outstanding capital stock, or of at least a
majority of the members in case of nonstock corporations,
shall be necessary. The bylaws shall be signed by the
stockholders or members voting for them and shall be kept in
the principal office of the corporation, subject to the
inspection of the stockholders or members during office hours.
A copy thereof, duly certified by a majority of the directors or
trustees and countersigned by the secretary of the corporation,
shall be filed with the Commission and attached to the original
articles of incorporation.
ADOPTION OF BY‐LAWS
SEC. 45. Adoption of Bylaws. –
Notwithstanding the provisions of the preceding paragraph, by-
laws may be adopted and filed prior to incorporation; in such
case, such by-laws shall be approved and signed by all the
incorporators and submitted to the Commission, together with
the articles of incorporation.
In all cases, bylaws shall be effective only upon the issuance by
the Commission of a certification that the bylaws are in
accordance with this Code.
ADOPTION OF BY‐LAWS
SEC. 45. Adoption of Bylaws. –
The Commission shall not accept for filing the bylaws or any
amendment thereto of any bank, banking institution, building
and loan association, trust company, insurance company, public
utility, educational institution, or other special corporations
governed by special laws, unless accompanied by a certificate
of the appropriate government agency to the effect that such
bylaws or amendments are in accordance with law.
ADOPTION OF BY‐LAWS
Procedures in adopting by‐laws.

The by‐laws may be adopted before or after incorporation.

In all cases, the By‐laws shall be effective only upon the
issuance by the SEC of a certification that the by‐laws are
not inconsistent with the AOI.
ADOPTION OF BY‐LAWS

Procedures in adopting by‐laws.

1. Pre ‐ incorporation – It shall be approved and

signed by all the incorporators and submitted
to the SEC, together with AOI.
 ADOPTION OF BY‐LAWS
Procedures in adopting by‐laws.

2. Post ‐ incorporation
a. Vote of the majority of the stockholders representing the outstanding
capital stock or members;
b. By‐laws shall be signed by the stockholders or members voting for them;
c. It shall be kept in the principal office of the corporation and subject to the
inspection of the stockholders or members during office hours
d. Copy thereof, duly certified by the BOD or BOT countersigned by the
secretary of the corporation, shall be filed with the SEC and shall be attached
with the original AOI. (Sec. 45)
ADOPTION OF BY‐LAWS
SEC. 46. Contents of Bylaws. – A private corporation may
provide the following in its bylaws:
(a)The time, place and manner of calling and conducting regular
or special meetings of the directors or trustees;
(b)The time and manner of calling and conducting regular or
special meetings and mode of notifying the stockholders or
members thereof;
(c)The required quorum in meetings of stockholders or members
and the manner of voting therein;
(d)The modes by which a stockholder, member, director, or
trustee may attend meetings and cast their votes;
ADOPTION OF BY‐LAWS
SEC. 46. Contents of Bylaws. – A private corporation may provide
the following in its bylaws:
((e)The form for proxies of stockholders and members and the manner
of voting them;
(f)The directors’ or trustees’ qualifications, duties and
responsibilities, the guidelines for setting the compensation of
directors or trustees and officers, and the maximum number of other
board representations that an independent director or trustee may
have which shall, in no case, be more than the number prescribed by
the Commission;
(g)The time for holding the annual election of directors of trustees
and the mode or manner of giving notice thereof;
ADOPTION OF BY‐LAWS
SEC. 46. Contents of Bylaws. – A private corporation may provide
the following in its bylaws:
(h)The manner of election or appointment and the term of office of
all officers other than directors or trustees;
(i)The penalties for violation of the bylaws;
(j)In the case of stock corporations, the manner of issuing stock
certificates; and
(k)Such other matters as may be necessary for the proper or
convenient transaction of its corporate affairs for the promotion of
good governance and anti-graft and corruption measures.
An arbitration agreement may be provided in the bylaws pursuant
to Section 181 of this Code.
VALIDITY OF BY-LAWS
ELEMENTS OF VALID BYLAWS
(1) They must not be contrary to existing law and inconsistent with
the Code;
(2) They must not be contrary to morals and public policy;
(3) They must not impair obligations of contract ;
(4) They must be general and uniform in their operation and not
directed against particular individuals,i.e., not discriminatory;
(5) They must be consistent with the charter or articles
ofincorporation; and
(6) They must be reasonable.
The Corporation Code of the Philippines, Annottated, De leon
ADOPTION OF BY‐LAWS
Section 47. Ways of amending, repealing or adopting new
by‐laws
1. Amendment may be made by stockholders together with the
Board – by majority vote of directors and owners of at least a
majority of the outstanding capital stock/members; or
2. By the board only after due delegation by the stockholders
owning 2/3 of the outstanding capital stock/members.
Provided, that such power delegated to the board shall be
considered as revoked whenever stockholders owning at least
majority of the outstanding capital stock or members, shall
vote at a regular or special meeting. (Sec. 48)
AOI vs. BY-LAWS
AOI BY‐LAWS

Condition precedent in the acquisition Condition subsequent; its absence

of corporate existence merely furnishes a ground for the
revocation of the franchise

Essentially a contract between the For the internal government of the

corporation and the stockholders/ corporation but has the force of a
members; between the stockholders/ contract between the corporation and
member inter se, and between the the stockholders/ members, and
corporation and the State; between the stockholders and
members;

Executed before incorporation May be executed after incorporation.

Sec. 46 allows the filing of the by‐laws
simultaneously with the Articles of
Incorporation
AOI vs. BY-LAWS
AOI BY‐LAWS

Condition precedent in the acquisition Condition subsequent; its absence

of corporate existence merely furnishes a ground for the
revocation of the franchise

Essentially a contract between the For the internal government of the

corporation and the stockholders/ corporation but has the force of a
members; between the stockholders/ contract between the corporation and
member inter se, and between the the stockholders/ members, and
corporation and the State; between the stockholders and
members;

Executed before incorporation May be executed after incorporation.

Sec. 46 allows the filing of the by‐laws
simultaneously with the Articles of
Incorporation
AOI vs. BY-LAWS
AOI BY‐LAWS

Condition precedent in the acquisition Condition subsequent; its absence

of corporate existence merely furnishes a ground for the
revocation of the franchise

Essentially a contract between the For the internal government of the

corporation and the stockholders/ corporation but has the force of a
members; between the stockholders/ contract between the corporation and
member inter se, and between the the stockholders/ members, and
corporation and the State; between the stockholders and
members;

Executed before incorporation May be executed after incorporation.

Sec. 45 allows the filing of the by‐laws
simultaneously with the Articles of
Incorporation
 AOI vs. BY-LAWS

AOI BY‐LAWS

Amended by a majority of the directors/ May be amended by a majority vote of the

trustees and stockholders representing 2/3 of BOD and majority vote of outstanding capital
the outstanding capital stock, or 2/3 of the stock or a majority of the member in
members in case of non‐stock corporations non‐stock corporation

Power to amend/repeal articles cannot be Power to amend or repeal by‐laws or adopt

delegated by the stockholders/ members to new by‐laws may be delegated by the 2/3 of
the board of directors/ trustees the outstanding capital stock or 2/3 of the
members in the case of non‐stock corporation
ONE PERSON CORPORATIONS

SEC. 119. By-laws. –

The One Person Corporation is not required to
submit and file corporate by-laws.
Question

Those regulate different internal matter of the corporation such as

calling and defining the conduct of the meeting of stockholders and
directors. (Phil CPA, 88-1-M; 88-2; 89-1-M)
a. Board of directors
b. By-laws
c. Article of incorporation
d. Proxy
Question

Those regulate different internal matter of the corporation such as

calling and defining the conduct of the meeting of stockholders and
directors. (Phil CPA, 88-1-M; 88-2; 89-1-M)
a. Board of directors
b. By-laws
c. Article of incorporation
d. Proxy
ONE PERSON CORPORATIONS (secs 115-132)

SEC. 116. One Person Corporation. –

A One Person Corporation is a corporation with a single
stockholder:
Provided, That only a
 natural person,
 trust, or
 an estate
may form a One Person Corporation.
ONE PERSON CORPORATIONS (secs 115-132)

SEC. 116. One Person Corporation. –

A One Person Corporation is a corporation with a single
stockholder:
Provided, That only a natural person, trust, or an estate
may form a One Person Corporation.
Banks and quasi-banks, pre-need, trust, insurance, public
and publicly-listed companies, and non-chartered
government-owned and -controlled corporations may not
incorporate as One Person Corporations:
xxx
ONE PERSON CORPORATIONS (secs 115-132)

SEC. 116. One Person Corporation. –

xxx
Provided further, That a natural person who is
licensed to exercise a profession may not
organize as a One Person Corporation for the
purpose of exercising such profession except as
otherwise provided under special laws.
ONE PERSON CORPORATIONS (secs 115-132)

SEC. 117. Minimum Capital Stock Required for

One Person Corporation. –
A One Person Corporation shall not be required to
have a minimum authorized capital stock except
as otherwise provided by special law.
ONE PERSON CORPORATIONS (secs 115-132)
SEC. 118. Articles of Incorporation. –
A One Person Corporation shall file articles of incorporation in
accordance with the requirements under Section 14 of this
Code. It shall likewise substantially contain the following:
(a) If the single stockholder is a trust or an estate, the name,
nationality, and residence of the trustee, administrator,
executor, guardian, conservator, custodian, or other person
exercising fiduciary duties together with the proof of such
authority to act on behalf of the trust or estate; and
(b) Name, nationality, residence of the nominee and alternate
nominee, and the extent, coverage and limitation of the
authority.
ONE PERSON CORPORATIONS

SEC. 119. By-laws. –

The One Person Corporation is not required to
submit and file corporate by-laws.
ONE PERSON CORPORATIONS (secs 115-132)

SEC. 120. Display of Corporate Name. –

A One Person Corporation shall indicate the
letters “OPC” either below or at the end of its
corporate name.
ONE PERSON CORPORATIONS (secs 115-132)

SEC. 121. Single stockholder as Director,

President. –
The single stockholder shall be the sole director
and president of the One Person Corporation.
ONE PERSON CORPORATIONS (secs 115-132)
SEC. 122. Treasurer, Corporate Secretary, and Other
Officers. – Within fifteen (15) days from the issuance
of its certificate of incorporation, the One Person
Corporation shall appoint a treasurer, corporate
secretary, and other officers as it may deem necessary,
and notify the Commission thereof within five (5) days
from appointment.
The single stockholder may not be appointed as the
corporate secretary.
xxx
ONE PERSON CORPORATIONS (secs 115-132)
SEC. 122. Treasurer, Corporate Secretary, and Other
Officers. – xxx
A single stockholder who is likewise the self-appointed
treasurer of the corporation, shall give a bond to the
Commission in such a sum as may be required:
Provided, That, the said stockholder/treasurer shall
undertake in writing to faithfully administer the One
Person Corporation’s funds to be received as treasurer,
and to disburse and invest the same according to the
articles of incorporation as approved by the
Commission. The bond shall be renewed every two (2)
years or as often as may be required.
ONE PERSON CORPORATIONS (secs. 115-
132)
SEC. 123. Special Functions of the Corporate Secretary. – In
addition to the functions designated by the One Person
Corporation, the corporate secretary shall:
(a) Be responsible for maintaining the minutes book and/or
records of the corporation;
(b) Notify the nominee or alternate nominee of the death or
incapacity of the single stockholder, which notice shall be given
no later than five (5) days from such occurrence;
xxx
ONE PERSON CORPORATIONS (secs. 115-
132)
SEC. 123. Special Functions of the Corporate Secretary. – In addition
to the functions designated by the One Person Corporation, the
corporate secretary shall:
xxx
(c) Notify the Commission of the death of the single stockholder
within five (5) days from such occurrence and stating in such notice
the names, residence addresses, and contact details of all known legal
heirs; and
(d) Call the nominee or alternate nominee and the known legal heirs
to a meeting and advise the legal heirs with regard to, among others,
the election of a new director, amendment of the articles of
incorporation, and other ancillary and/or consequential matters.
ONE PERSON CORPORATIONS (secs. 115-132)
SEC. 124. Nominee and Alternate Nominee. –
The single stockholder shall designate a nominee and an
alternate nominee who shall, in the event of the single
stockholder’s death or incapacity, take the place of the single
stockholder as director and shall manage the corporation’s
affairs.
xxx
ONE PERSON CORPORATIONS (secs. 115-
132)
SEC. 124. Nominee and Alternate Nominee. –
xxx
The articles of incorporation shall state the names, residence
addresses and contact details of the nominee and alternate
nominee, as well as the extent and limitations of their authority
in managing the affairs of the One Person Corporation.
The written consent of the nominee and alternate nominee shall
be attached to the application for incorporation. Such consent
may be withdrawn in writing any time before the death or
incapacity of the single stockholder.
ONE PERSON CORPORATIONS (secs. 115-132)
SEC. 125. Term of Nominee and Alternate Nominee. –

When the incapacity of the single stockholder is temporary,

 the nominee shall sit as director and manage the affairs of the
One Person Corporation
 until the stockholder, by self-determination, regains the
capacity to assume such duties.
ONE PERSON CORPORATIONS (secs. 115-132)
SEC. 125. Term of Nominee and Alternate Nominee. –

In case of death or permanent incapacity of the single

stockholder,
 the nominee shall sit as director and manage the affairs of the
One Person Corporation
 until the legal heirs of the single stockholder have been
lawfully determined, and
 the heirs have designated one of them or
 have agreed that the estate shall be the single stockholder of
the One Person Corporation.
ONE PERSON CORPORATIONS (secs. 115-132)

SEC. 125. Term of Nominee and Alternate Nominee. – xxx

The alternate nominee shall sit as director and manage the One
Person Corporation
 in case of the nominee’s
 inability,
 incapacity,
 death, or
 refusal to discharge the functions as director and manager of the
corporation,
 and only for the same term and under the same conditions
applicable to the nominee.
ONE PERSON CORPORATIONS (secs. 115-
132)
SEC. 126. Change of Nominee or Alternate Nominee. –
The single stockholder may,
 at any time,
 change its nominee and alternate nominee
 by submitting to the Commission the names of the new
nominees and their corresponding written consent.
For this purpose, the articles of incorporation need not be
amended.
ONE PERSON CORPORATIONS (secs. 115-
132)

SEC. 127. Minutes Book. –

A One Person Corporation shall maintain a minutes book which
shall contain all actions, decisions, and resolutions taken by the
One Person Corporation.
ONE PERSON CORPORATIONS (secs. 115-132)
SEC. 128. Records in Lieu of Meetings. –
When action is needed on any matter, it shall be sufficient to
 prepare a written resolution,
 signed and dated by the single stockholder, and
 recorded in the minutes book of the One Person Corporation.

The date of recording in the minutes book shall be deemed to

be the date of the meeting for all purposes under this Code.
ONE PERSON CORPORATIONS (secs. 115-132)
SEC. 129. Reportorial Requirements. – The One Person Corporation
shall submit the following within such period as the Commission may
prescribe:
(a) Annual financial statements audited by an independent certified
public accountant: Provided, That if the total assets or total liabilities
of the corporation are less than Six Hundred Thousand Pesos
(P600,000.00), the financial statements shall be certified under oath
by the corporation’s treasurer and president.
(b) A report containing explanations or comments by the president on
every qualification, reservation, or adverse remark or disclaimer
made by the auditor in the latter’s report;
(c) A disclosure of all self-dealings and related party transactions
entered into between the One Person Corporation and the single
stockholder; and
ONE PERSON CORPORATIONS (secs. 115-132)
SEC. 129. Reportorial Requirements. –
(d) Other reports as the Commission may require.
For purposes of this provision, the fiscal year of a One Person
Corporation shall be that set forth in its articles of incorporation
or, in the absence thereof, the calendar year.
The Commission may place the corporation under
 delinquent status should the corporation
 fail to submit the reportorial requirements
 three (3) times, consecutively or intermittently,
 within a period of five (5) years.
ONE PERSON CORPORATIONS
 No Minimum Capital Requirement

An OPC can be registered by foreign investors. It must,

however, be in a sector that allows 100 percent foreign
ownership.
Manufacturing, export, retail, and e-commerce are all
acceptable industries.
ONE PERSON CORPORATIONS (secs. 115-132)
SEC. 130. Liability of Single Shareholder. –
A sole shareholder claiming limited liability has the burden of
affirmatively showing that the corporation was adequately
financed.
Where the single stockholder cannot prove that the property of
the One Person Corporation is independent of the stockholder’s
personal property, the stockholder shall be jointly and severally
liable for the debts and other liabilities of the One Person
Corporation.
The principles of piercing the corporate veil applies with equal
force to One Person Corporations as with other corporations.
ONE PERSON CORPORATIONS (secs 115-132)
SEC. 131. Conversion from an Ordinary Corporation to a One
Person Corporation. –
When a single stockholder acquires all the stocks of an ordinary
stock corporation, the latter may apply for conversion into a
One Person Corporation, subject to the submission of such
documents as the Commission may require. If the application for
conversion is approved, the Commission shall issue certificate of
filing of amended articles of incorporation reflecting the
conversion.
The One Person Corporation converted from an ordinary stock
corporation shall succeed the latter and be legally responsible
for all the latter’s outstanding liabilities as of the date of
conversion.
ONE PERSON CORPORATIONS (secs 115-132)
SEC. 132. Conversion from a One Person Corporation to an
Ordinary Stock Corporation. –
A One Person Corporation may be converted into an ordinary
stock corporation after due notice to the Commission of such
fact and of the circumstances leading to the conversion, and
after compliance with all other requirements for stock
corporations under this Code and applicable rules. Such notice
shall be filed with the Commission within sixty (60) days from
the occurrence of the circumstances leading to the conversion
into an ordinary stock corporation.
If all requirements have been complied with, the Commission
shall issue an amended certificate of incorporation reflecting
the conversion.
 Formal Organization and Commencement
of Business
Sec. 21. Effects of non-use of corporate charter and
continuous inoperation of a corporation. — Effects of Non-Use
of Corporate Charter and Continuous Inoperation. –
If a corporation does not formally organize and commence its
business within five (5) years from the date of its
incorporation, its certificate of incorporation shall be
deemed revoked as of the day following the end of the five-
year period.
 Formal Organization and Commencement
of Business
Sec. 21. Effects of non-use of corporate charter and
continuous inoperation of a corporation. — Effects of Non-Use
of Corporate Charter and Continuous Inoperation. – cont’d.

However, if a corporation has commenced its business

but subsequently becomes inoperative for a period of
at least five (5) consecutive years, the Commission
may, after due notice and hearing, place the
corporation under delinquent status.
 Formal Organization and Commencement
of Business
Sec. 21. – cont’d.
A delinquent corporation shall have a period of two
(2) years to resume operations and comply with all
requirements that the Commission shall prescribe.
Upon compliance by the corporation, the Commission shall
issue an order lifting the delinquent status. Failure to comply
with the requirements and resume operations within the
period given by the Commission shall cause the revocation of
the corporation’s certificate of incorporation.
 CORPORATE POWERS- Lifting ban on corporate donations for
political parties or candidates

Sec. 35. cont’d

9. To make reasonable donations, including those for the public
welfare or for hospital, charitable, cultural, scientific, civic, or
similar purposes: Provided, That no foreign corporation shall
give donations in aid of any political party or candidate or for
purposes of partisan political activity;
 MEETINGS
SEC. 52. Regular and Special Meetings of Directors or Trustees; Quorum. –
Xxx
Directors or trustees who cannot physically attend or vote at board meetings can
participate and vote through remote communication such as
 videoconferencing,
 teleconferencing, or
 other alternative modes of communication
that allow them reasonable opportunities to participate.
Directors or trustees cannot attend or vote by proxy at board
meetings.
A director or trustee who has a potential interest in any related party transaction
must recuse from voting on the approval of the related party transaction without
prejudice to compliance with the requirements of Section 31 of this Code.

xxx
 MEETINGS
SEC. 49. Regular and Special Meetings of Stockholders or Members. –
Xxx
The right to vote of stockholders or members may be exercised
 in person,
 through a proxy, or
 when so authorized in the bylaws, through remote communication
or in absentia.
The Commission shall issue the rules and regulations governing
participation and voting through remote communication or in
absentia, taking into account the company’s scale, number of
shareholders or members, structure, and other factors consistent
with the protection and promotion of shareholders’ or member’s
meetings.
END